I was visiting a physics blog (well the Duke case has lost my interest so I have to do something) and came across this astonishing discussion of economics. They are discussing how stupid the Laffer curve is as presented in a recent Wall Street Journal article. It seems like our vaunted physicists believe a linear curve better fits the data than the third or fourth order curve the Wall Street Journal presented. He shows the two curves with some comments and then says:
No, I am not being unfair. I did not draw the “Laffer Curve” on top of those data in order to embarrass the WSJ or AEI. They did it themselves; the second graph is how the plot was actually published by the Journal, while the first one was Mark Thoma’s subsequent reality-based-community version of the plot. As Kevin Drum says, it’s “like those people who find an outline of the Virgin Mary in a potato chip.”So I have a question or twenty:
Among other features, we note with amusement that the plotted curve implies that tax revenues hit zero at a corporate tax rate of about 33%, and become dramatically negative thereafter. As of this writing, it is unclear what advanced statistical software package was used to fit the Laffer Curve to the data; the smart money seems to be on MS Paint.
Can you explain why tax revenues in America have been rising at double digit rates despite the tax cuts of 2003? They started going up as soon as the reductions were passed and have been rising ever since.
It seems that the experiment is being done and it proves that the Laffer curve guys may be right.
As a good aerospace engineer I trust the data over theory every time.
There is a very good reason that, for the most part, money decisions are made by engineers and rarely by scientists. Engineers are expected to make things that work.
I would like to see more engineers in Congress. More scientists would be a disaster due to insufficient contact with the real world.
Let me note that the WSJ graph (mistaken in derivation or not) most closely fits the evidence. Lowering tax rates raises government revenue. At least in America.
B said: If the people in country X want more (public transport? social security? health insurance? unemployment insurance?) to be shared responsibility, the thing to do so is to use taxes.
Let me rephrase that:
If the people in country X want to steal other people's money the responsible way to do it is to use taxes.
Hey physics guys. The USSR failed. Europe can't support its welfare state. America will be severely strained by its welfare state. And you guys want more of the same? With Big Physics on the government dole I understand your orientation. However, it may not be popular with the run of mill citizen who dislikes having his pocket picked.
I know how you can get back in the good graces of the average citizen. Give them the physics to build a low cost p-B11 (proton - Boron 11) burning fusion reactor which can deliver power to the grid and your esteem in the eyes of the average citizen will go way up. They might be more willing to open their wallets.
BTW I'm working on an open source test reactor along the Bussard Polywell lines. I'm short a plasma physicist. Any one care to join in?
IEC Fusion Technology blog
If you are not familiar with Dr. Bussard's work here is a good place to start:
Easy Low Cost No Radiation Fusion. Actually it is not no radiation. A 100 MW reactor will produce about 1 Kw of neutrons. Not too hard to shield. Not significant for making plutonium. So I learned a bit since I wrote that.
You really want to do something for the poor of the world? Forget Socialism. Reduce the cost of energy. That is actually within your means.
Better yet get us off the oil standard.
Yeah. The LHC (Large - they are not kidding - Hadron Collider) is sexy. And the superconducting magnets are thrilling. Well they thrill me, but I've been known to have some strange fetishes. Evidently that is one of them.
You guys need to focus for a few years on providing benefits to society. Don't you know there is a war on? It could be ended with physics and I don't mean bigger bombs.
There are a number of IEC fusion devices out there. From my studies the Bussard Reactor looks to be the most likely to succeed. However, if you don't like that there is a commercial venture Tri Alpha Energy. Or the guys at the University Wisconsin. Or Champaign Urbana.
Here is a look at some of the small fusion projects [pdf] currently going on in America.
Give what you can. An hour a week would be a start.
Cross Posted at Classical Values